Anti-corruption accuses Iberdrola Generación of manipulating energy prices

Iberdrola headquarters in Madrid. / afp

The Prosecutor's Office requests a fine of 83 million from the company and sentences of two years to four company directors for inflating the price of hydraulics in the winter of 2013

AC Madrid

New legal mess for Iberdrola. The Anti-Corruption Prosecutor's Office has launched this Monday an indictment against Iberdrola Generación (Iberdrola's electricity production business) and four of its directors, whom it accuses of a crime against the market, considering that they maneuvered to manipulate prices of energy in 2013, hurting consumers.

The Prosecutor's Office requests that Angel Chiarri Toscano, Director of Energy Management, Gregorio Relaño Cobián, responsible for Optimization, Resource Management and Trading, José Luis Rapún Jiménez, Head of Asset Management and Javier Paradinas Zorrilla, Head of Short-Term Markets and Global Generation.

According to the indictment, they request that Iberdrola Generación be sentenced to pay a fine of more than 84.8 million euros, before the system that, according to an anti-corruption complaint, the company devised to “increase the price of energy sold, beyond what should result from the free concurrence of supply and demand.

To achieve this higher price in the electricity market, from November 30, 2013 and until December 23, 2013, Iberdrola Generación would have increased "without legitimate cause that justifies it" the price in the electricity offers corresponding to its Duero, Sil and Tajo hydroelectric plants, at a level above the daily market price that prevented operations from being matched, "despite the increase experienced in those days by the prices of electricity in the spot market, which placed it before an optimal opportunity cost.

This situation determined the withdrawal of the programming of the aforementioned plants. That is, they stopped producing energy. According to the Prosecutor's Office, between November 2 and November 29, 2013, the dispatched offer did not exceed 70 euros per megawatt hour (MWh), concentrating 91.48% of it -866.4 GW- in a price band below 50 euros MWh.

Regarding the energy not dispatched, 48.13% of the energy offered 1,217.3 GW- was in price bands above 80 euros per MWh,

In the same way, they assure that between November 30 and December 23 of that year, 32.54% of the energy dispatched -183.7 GW- was in a price band higher than €80/MWh. "Of the energy offered not dispatched, 2,655.9 GW, -94.33% -2,505.3 GW, was in price bands above €80/MWh," they indicate.

Under this scenario, they consider that Iberdrola broke the order of merit of the power plants in the production dispatch, "causing the reduction of electricity generation from the Duero, Sil and Tajo hydroelectric plants, and, as a consequence, that the purchase operations were married with energy from combined cycle plants.

These had a higher cost and handled a range of prices also higher, between 80 and 90 euros per MWh, compared to the average price of energy from hydroelectric plants located between 45 and 55 euros.

"As of December 24, 2013, the change in weather conditions due to strong storms and wind caused a reduction in the price of energy due to the significant contribution of renewable sources," they explain from Anticorruption. So the immediate consequence of "the artifice concocted and carried out by the accused" was the rise in the price of electricity by at least 7,156 euros per MWh, according to the indictment.

This would have caused damage to the claim of at least 107.34 million euros. Specifically, the claims of 18 marketing companies that have claimed the company would amount, according to estimates, to more than 10.56 million euros. The rest, up to 107.34 million, would have been borne by consumers with variable price contracts, and in fixed price contracts by the insurance companies that covered them.

"Iberdrola Management dispatched 2,965,779 megawatts (2,965.779 GW) in the period under review, which meant a profit of 21,222,818 euros," the Prosecutor's Office adds in its letter.

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